Jack Henneman - Chief Financial Officer Dr. Charles Link - Chairman, Chief Executive Officer and CSO Dr. Nicholas Vahanian - President and CMO.

Stephen Willey - Stifel Mara Goldstein - Cantor Fitzgerald Mike Ulz - Robert W. Baird Biren Amin - Jefferies Peter Lawson - SunTrust.

Good day, ladies and gentlemen. And welcome to the NewLink Genetics Financial Third Quarter 2016 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would like now to hand the conference over to Jack Henneman, Chief Financial. You may begin..

Good morning. And thank you for joining Dr. Charles Link, Chairman, Chief Executive Officer and Chief Scientific Officer; Dr. Nicholas Vahanian, President and Chief Medical Officer; and me for the NewLink Genetics' third quarter 2016 financial conference call.

Earlier this morning, we issued a press release announcing our financial results for the quarter. Certain statements made during this call are forward-looking. Actual results may differ materially from those projected in any forward-looking statement.

Additional information concerning factors that could cause actual results to differ is contained in our periodic reports filed with the SEC. The forward-looking statements made only as of the date hereof and the company undertakes no obligation to update or revise the forward-looking statements. I will now turn the call over to Dr. Link..

Thank you, Jack. Thank you for joining us today to discuss our third quarter results and follow-up from our Investor Day program in New York City last Tuesday.

At that program, our management team and the distinguish group of outside speakers discuss the science and increasing clinical validation of IDO pathway inhibition, NewLink’s two product candidates targeting the IDO pathway, the clinical and development plan for indoximod, our proprietary IDO pathway inhibitor and introduced our early-stage immuno-oncology program PTEN.

Our webcast of these presentations can be found on the Investor Relations page of our website and we very much encourage you to listen to it. Today, Dr. Vahanian and I will review our corporate accomplishment and point out some of the highlights from our program last week. Finally, Jack will provide an operational and financial update.

We are encouraged that recent data have increasingly validated the IDO pathway in immuno-oncology. NewLink has two separate and distinct IDO pathway inhibitors in current clinical development.

GDC-0919 is our direct and genetic inhibitor of IDO that we have partnered in the large ongoing collaboration with Genentech Roche, which was launch in late 2014. Indoximod is our proprietary IDO pathway inhibitor that is not currently partnered.

Evolving data suggested indoximod’s primary mechanism of action to inhibit the IDO pathway is by providing a tryptase efficiency signal to T-cell. Thus, although, both GDC-0919 and indoximod block the IDO pathway, they appear to have quite distinct mechanism of action, and therefore, represent two different opportunities for us.

Our collaboration with Genentech has made solid progress over the past two years. Our joint research agreement that involves novel chemistry has made progress on the discovery, although, we are not able to comment further at this time. It is our hope that this effort will eventually lead to a new clinical stage product candidate.

Our current collaboration with Genentech is processing with GDC-0919, currently in the Phase 1b trial, which has been revised to a total target enrollment of 276 patients. The trial described in detail in our Investor Day presentation currently available on our website. Overall, we have been very pleased with our collaboration with Genentech.

In parallel, indoximod clinical development is advancing in a period of Phase 2 trial in combination with other cancer therapies. We anticipate providing further signing updates and trial results during 2017.

Finally, we are focused on further pipeline development both on the early-stage internal program such as PTEN as a novel target and through the evolution of other external opportunities.

We believe NewLink has demonstrated a proven track record of both inlicensing and outlicensing in product candidate, and hopefully, this experience will benefit us going forward. We believe our current balance sheet provides a solid base to execute our current clinical development plan. Now, I will turn the call over to Dr.

Vahanian to provide more detail about our clinical programs..

Thank you, Chuck. As the scientific speaker discussed at our Investor Day last week, the IDO pathway increasingly seen as essential [ph] immune escape (5:06) and NewLink Genetics is a leader in the development of product candidates that target IDO and its downstream effects.

You have seen data from our early studies and those of other companies that provide post-clinical validation of IDO as a target. That’s very exciting for us. Since IDO is likely has a role in many types of malignancies and because we have multiple shots on goal.

Two of the five candidates in the clinic targeting the IDO pathway are owned by NewLink Genetics. We believe 2017 will be an important for our IDO pathway program. First, with the GDC-0919, we expect to make continued progress with our partner Genentech in the clinic. As you know, Genentech is responsible for all new communications in the program.

Second, indoximod our proprietary product candidate targeting the IDO pathway is clearly being developed in Phase 2 trial across multiple indications. We will retain all rights to indoximod. So how well we’re approaching indoximod. We are working on formulation improvements of indoximod to optimize its clinical and commercial potential.

We plan to update clinical data across multiple cancers including melanoma, pancreatic and brain in 2017. We hope to be in the position to launch a randomize trial for indoximod in a lead indication in the second half of 2017.

As discussed by our scientific speakers at the Investor Day pre-clinical data suggest that the combination of IDO pathway inhibitors and anti-PD-1 or anti-PD-L1 antibodies are synergistic.

Our current belief based on the basic science and emerging clinical data is that IDO pathway inhibitors work best when used in combination with other checkpoint blockade agents, such as, anti-PD-1 or anti-PD-L1 antibodies or chemotherapy.

Emerging clinical data also suggests that the combinations including IDO may have a favorable safety profile compared to some of the alternatives. Now, I’ll turn the call over to Jack to discuss the financial results.

Jack?.

Thank you, Nick. Before we move to the Q&A, I want to provide a quick overview of key financials this quarter. We finish the quarter with $148.3 million in cash and equivalents, compared to $197.8 million at the end of 2015.

Research and Development expenses in the Q3 of 2016 were $24.5 million compared to $22.5 million than the comparable period in 2015. The increase is primarily due to increases in clinical trial and manufacturing expenses offset by a decrease in wages as a result of the restructuring completed in the second quarter of 2016.

NewLink Genetics reported a net loss of $15.5 million or a loss of $0.54 per diluted share for the third quarter of 2016 compared to a net loss of $15.9 million or a loss of $0 55 per diluted share for the comparable period in 2015. We are currently expecting to end the year with approximately $132 million in cash and equivalents.

And now, I will turn the call over to the operator for questions..

[Operator Instructions] And our first question comes from Stephen Willey from Stifel. Your line is now open..

Yeah. Hi. Good morning, guys. Thanks for taking the – thanks for taking the question..

Good morning, Steve..

Good morning, Chuck. So, I think, you had been maybe some prior mention of trying to integrate other biopsy cohort or get patients to consent to biopsy in the melanoma study.

Is there any update that you guys can provide along those lines?.

We integrated, hi, Steve, it’s Nick..

Hi, Nick..

Hi. As we mentioned at the Investor Day, we’ve expanded the pancreatic study and included little biopsy for those patients for immunologic cohort studies and additional studies So we are doing that in pancreas. We have not done in melanoma..

Okay. And then, I think, you referenced the formulation improvements both at the event again this morning and I think, should we be thinking about that as may be the core of an IP extension strategy for indoximod and I guess, as we think about initiating some of these potentially later stage/registration studies at some point next year.

Just clarity on the IP front going to be a gaining factor in the pursuit of any of these – for these indications..

So to the second part of your question, I would say, no. It is certainly I hope that data that’s coming out of the new formulations that we are working on and some pro drug strategies we are working on will lead to new intellectual property.

As you are aware, the current intellectual property with indoximod was limited to the United States and it’s our hope to be able to expand IP and….

Okay..

Of course, we are also hoping to have regulatory exclusivity plan to the benefit of that category of drug..

Okay. Thanks taking the questions..

Okay..

Our next question comes from Mara Goldstein from Cantor Fitzgerald. Your line is now open..

Thanks very much for taking the question.

I have question on PTEN pathway program and how should we think about the program from an external perspective and where and when do you think that we might see some data that relates to having a lead compound to put into math?.

Hey, Mara. Hi. Good morning..

Yeah..

You know, I appreciate to give you some color on this, David Munn is one who most recently described this immune related function for PTEN and as you know, we’ve had a long ongoing collaboration with Dr. Munn in his lab related to the IDO program and so it is logical as our experience attempt to extend that into the PTEN room.

We are not ready at this point to sort of make projection about data or when releases would happen, but we do think that this is an important new target in the immune-oncology, but we are not making any type projections about when we are going to have anything that to be a clinical candidate..

Okay.

If I can also just ask a financial question that’s really just related to some of the movement in the P&L between things like grant revenue and AP, and how we should think about grant revenue on a go-forward basis given that you just got that new part grant this year and the jump in AP and whether that’s related to the GDC-0919 or the [ph] defense (13.08) grant?.

I mean most of the – so the time issues that we’ve talk about in the past – sales, we did unmatched if you will expenses and revenue on a quarter-by-quarter basis, they should line up adequately over any period of during this quarter. So that’s big topic.

We have various expenses that have been accrued in connection with our restructuring including around the settlement of contracts and other things that have not yet been paid. So there is influence there as well..

Okay..

But the quarter-by-quarter if you will revenue and expense dislocation around the government contracts will continue until we have worked our way through that exercise and we talked a little bit about that at the Investor Day, not so much from a financial point of view but....

Okay.

But just from, I guess, sort of, looking into the fourth quarter and the run rate particularly on the grant revenue side for this year and next year, should we think about it in a similar way or is it just going to continue to be lumpy?.

Well, it’s going to continue to be lumpy which is a similar way, I guess, that’s what I was saying..

Okay..

So I would expect quarter-by-quarter lumpiness on the grant revenue as money gets released. There is -- if you want a little more color which I think is probably not terribly interesting, but it explains a little bit of it.

Under these arrangements with [inaudible] (15.08) Merck is actually our subcontractor and as a result there is a fairly complex pathway of work and documentation that occurs over a period of time between when we do work, when Merck does work, when Merck tell us and then when we are able to tell the government and thing.

And so that’s really what drives that. I think any more than that is probably more detail that anyone needs or interested in..

All right. I appreciate it. Thank you..

And the next question comes from Mike Ulz from Robert W. Baird. Your line is now open..

Yeah. Hi, guys. Thanks for taking the question..

Good morning..

Good morning.

So with data for indoximod and pancreatic cancer expected in the first half of next year, can you maybe talk about what do you want to see from that study in order to make a decision coming that forward?.

Did you asking a pancreatic study, Mike..

Yeah. Yeah..

Okay. Hi, this is Nick.

How are you?.

Good..

So in pancreatic study when we reported at ASCO that was about 30, 35 – 31 patients, I believe, we reported data on. That study was total of 100 patients and study continued to enroll. We will give an update on that study in the first half of 2017.

The results for the last ASCO reported response rates of about 45% compared very favorably as oppose to Gem+Abraxane combination, which was approved around low 20%, 23% response rate, so 43% versus, 45% versus 23% response rate was quite favorable.

But in addition to that we are continued work with [ph] BIs (17.09) to interpret the results from durational response and indoximod response which was also quite impressive. So if those trends continue that would certainly indicate, that would translate well to randomize study. So the early results were quite encouraging for us.

If those results hold that would be a positive direction..

Yeah. I think an important, this is Chuck, I think an important point here is that. It’s not just a response rate we will look at since the numbers are small because the variation between the Phase 2 and Phase 3 data in response rate.

That is maybe not as telling as some of the pattern of response that we find encouraging where in a period at least in their early data of some of the paid patient have a longer duration of response is expected.

Our goal is to try to confirm those results by larger numbers of patients, while with the longer period of time and then make a decision for what type Phase 2 randomize trial we might do around that and that was it..

So the, well, the biopsy data also be available in the first half of next year and then do you need to see that data before you would make a decision of cohort?.

Thanks for actually – Michael thanks for actually pointing that, indeed one of the reasons that we have integrated the biopsy cohort is to get some close study, the trends look favorable, 45% versus 23%, it’s a Phase 2 study, the duration of response is look favorable, but though we fully confirmative to get immunologic cohorts to those responses, that’s the reason we integrated that and we will love that opportunity as we are going forward to integrate that data as well..

Great. Thanks guys..

Thank you..

And our next question comes from Biren Amin from Jefferies. Your line is now open..

Hi, Biren..

Yeah. Hi, guys. Thanks for taking my question. Just I guess on the indoximod panc study that you just mentioned with the Gem+Abraxane.

Why shouldn’t we compare the response rate that you have seen to Phase 2 data from Gem+Abraxane?.

I think it’s fair to compare exactly what the other Phase 2 studies have done in patient selection and stages of the patients and how advance they are and but I think comparing studies across studies from Phase 2 could lead to I think false conclusions.

On the other hand the Phase 3 study which was – which we tried to design the study after was in our opinion would be more fair. Phase 2 study is being the small size across between study would be, I think, less informative, but that’s why we have to randomize larger study to get to full results..

Okay. And….

Hi, Biren. Biren, I think it’s a reasonable concern. I think the reason we want to have data on more patient and specifically the reason we want to go and look the biology is to see those immunologic cohorts that fit with this pattern of response.

As I said, more than just a response rate because in the range in response rate between Phase 2 and Phase 3 in the Abraxane immolation data, Abraxane+Gem data I should say. So I think we have more to learn there..

Okay..

And also, just a durability of responses and indoximod response those are things that we are looking to gain more information from our Phase 2 study from the limited number of patients that we have so..

And just a clarify on the timeline, will we have additional interim data at ASCO GI or will we have to wait for I guess for ASCO meeting in June for additional data from this trial?.

At Investor Day and I really – I mentioned and it’s going to be in the first half of 2017 we will have more sophisticated data..

Great. Thank you..

Thank you..

Our next question comes from Peter Lawson from SunTrust. Your line is now open..

Good morning, Peter..

Good morning. Just a couple of financial questions.

Maybe you can say that help us around kind of what R&D and kind of SG&A expense heading for the rest of the year and into next?.

Well, we are in development stage, obviously, so a huge part of our expenditure aren’t really any topic or it has been R&D. I would say that in general we are – we fundamentally made our restructuring moves in Q2, certainly around the people peace.

There are – so that part has been basically reflected in the numbers, although there was some small movement in the Q3. But some of the other things we are doing about winding down contracts and other kinds of payments, most of which have been, virtually all of which have been also reflected in the financial statements.

You will see that in the slide that we attached, going forward we generally expect to consume on the order of $13 million in cash a quarter, there will be some volatility around that number.

There will more implied in Q4, partly because we expect to settle up, I think, we made also in our promises that couple of this sort of open contracts we have going back to our work to prepare to commercialize all depend on sale. So there’s some extra cash going out but that’s reflected in the incurred expense.

Generally, the trend over the last year and a half and those line items will decline especially when you exclude non-cash items like equity comp and such..

Okay. Thank you so much.

Just around – just also adding additional assets, what stage area and kind of timing you are thinking through?.

So we are interested in assets that we believe are either immune-oncology assets or assets that we think could have synergy with immuno – with our immuno-oncology program. We have our business development team working to look at a lot of different outside assets and those are probably clinical assets to assets that are at clinical stage.

I think that if it was something that that was an asset that we felt was more near-term to the clinic, that’s probably the most probable category. But it’s no guarantee that we will be able to find the inlicense that we think is the right product candidate at the right sort of economics for us..

Thank you so much..

Thank you..

I am showing no further questions. I would like now to turn the call back to Dr. Charles Link for any closing remarks..

All right. Thank you everyone for joining us on the call this morning. Our team looks forward to updating you on additional achievements over the coming months. Take care..

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day..